Russian state-controlled gas monopoly Gazprom and the country’s nuclear conglomerate Rosatom have agreed to join forces to investigate the potential of a blue hydrogen project on Sakhalin Island.

The annual capacity, location, source of natural gas and a schedule for the initiative will be determined during joint consultations, the companies said.

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Currently, both companies have agreed they will produce hydrogen from natural gas, to be delivered by Gazprom, with the aim of capturing and storing the excess carbon dioxide to allow the duo to market hydrogen globally.

Russian authorities have designated Sakhalin Island as the country’s first region to attempt to reach carbon neutrality by 2025.

The island has no major industries, other than fishing and onshore and offshore oil and gas production and exports, where key players are ExxonMobil of the US and Gazprom with their Sakhalin 1 and Sakhalin 2 offshore projects.

Besides Sakhalin 2, Gazprom has major gas reserves on the island at the yet-to-be developed Kirinsky offshore block, where three gas fields have been identified.

Commercialisation of the Kirinsky reserves has been on hold because of the low gas demand on the Russian mainland, with the Gazprom-owned Sakhalin–Khabarovsk-Vladivostok trunkline carrying gas mostly during autumn and winter, with volumes being used as fuel for heating residential and commercial buildings.

While Gazprom is set to provide gas to the discussed venture, it is anticipated that Rosatom will strive to become a leading contractor and technology supplier to the joint venture following its 2018 decision to invest in hydrogen initiatives in Russia.

The Gazprom-Rosatom facility on Sakhalin is the second publicly announced hydrogen project in the country after an earlier decision by Russia's largest independent gas producer Novatek to convert its planned Obsky liquefied natural gas facility into an ammonia producing and exporting project.

Novatek hydrogen ambitions

Speaking at the end of the last week in Vladivostok, Novatek executive chairman Leonid Mikhelson said the project is expected to export 2.5 million tonnes per annum of ammonia to international markets following the completion of the first phase, utilising estimated 3 billion cubic metres of gas.

A second phase will have a similar capacity of 2.5 million tpa of ammonia, with Novatek discussing a possible partnership for this phase with Russian petrochemical giant Sibur and other investors, according to Mikhelson.

He has acknowledged time constraints to commercialise Russian gas reserves because of the unfolding energy transition.

Mikhelson expects international customers to gradually reduce the signing of long-term LNG contracts between 2030 and 2035, as demand for gas begins to fall.

Long-term gas sales contracts are required for Novatek and other gas producers to arrange the multi-billion financing required for their capital-intensive LNG developments in the north Russian region.